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Growthpoint Properties Limited - Company Announcement
Growthpoint Properties Limited
(Incorporated in the Republic of South Africa)
(Registration number 1987/004988/06)
Share code: GRT ISIN: ZAE 000037669
("Growthpoint" or "the company")
Acquisition of a portfolio of linked units in property loan stock companies and
units in property unit trusts from Sentinel Mining Industry Retirement Fund
("Sentinel") and the Mine Employees Pension Fund ("MEPF")
1. INTRODUCTION
Further to the cautionary announcement published on 30 August 2002, Investec
Bank Limited ("Investec") is authorised to announce that Growthpoint has entered
into an agreement ("the acquisition agreement") with Sentinel and MEPF
(collectively "MPF") in terms of which Growthpoint will acquire ("the
acquisition") a portfolio of listed linked units in property loan stock
companies and listed units in property unit trusts ("the MPF portfolio"). The
effect of the acquisition will be to change the nature of Growthpoint from a
company investing purely in physical property, to include investments in
physical property and investments in other listed property loan stock companies
and listed property unit trusts.
The acquisition is subject, inter alia, to the fulfilment of the suspensive
conditions set out in paragraph 2.5 below.
2. THE ACQUISITION
2.1 Strategy and rationale for the acquisition
Following the successful reverse-listing of the physical property portfolios
of Sentinel and MEPF into Growthpoint in September 2001 and the effective
creation of the largest property loan stock company listed on the JSE Securities
Exchange South Africa ("the JSE") in terms of market capitalisation, the board
of directors of Growthpoint ("the board") embarked on a strategy to increase the
asset base of the company by acquisition with the intention of initially
achieving a market capitalisation of more than R2,0 billion to satisfy investor
and market demand.
Taking into account current market conditions, with relatively high interest
rates and accompanying high yields in the listed property sector, the board has
decided to take advantage of the relative strength of Growthpoint`s rating by
acquiring a portfolio of higher yielding listed property shares which should be
yield enhancing to Growthpoint.
The yield enhancing nature of this acquisition is a mechanism to enable
Growthpoint and the board to pursue a longer term strategy of selectively
targeting better quality, lower yielding physical properties and property
portfolios thereby securing the long term sustainability and quality of income
streams from the overall Growthpoint portfolio and asset base.
The acquisition will increase the total asset base of Growthpoint to over
R2,4 billion. In addition to providing greater sectoral and regional
diversification to the Growthpoint asset base, the acquisition also achieves
overall risk diversification through exposing the company to a large cross
section of the listed property sector and the underlying physical property
assets of these companies.
The new structure of Growthpoint`s asset base comprising physical property
and a portfolio of listed property securities, together with the differential
cash flows being acquired in terms of the acquisition, as well as the variation
in quantity and timing of these cash flows, provides Growthpoint with greatly
enhanced flexibility to re-organise its physical portfolio as well as manage its
funding structures and requirements.
2.2 The acquisition
The acquisition consists of listed linked units in 8 property loan stock
companies and listed units in 4 property unit trusts, respectively with a total
gross value of R650,0 million being the total purchase consideration to be paid
by Growthpoint for the MPF portfolio.
The table below summarises the MPF portfolio being acquired by Growthpoint:
% of
Number of total units
units in issue
Listed linked units in property
loan stock companies
ApexHi Properties Limited (A debentures) 3 600 000 3,32
ApexHi Properties Limited (B debentures) 16 000 000 14,77
Arnold Property Fund Limited 12 400 000 7,92
Hyprop Investments Limited 4 000 000 6,18
iFour Properties Limited 10 000 000 17,16
Metboard Properties Limited 39 750 000 19,99
Pangbourne Properties Limited 12 300 000 6,76
Primegro Properties Limited 8 000 000 5,56
S A Retail Properties Limited 17 200 000 11,28
Listed units in property unit trusts
Allan Gray Property Trust 14 800 000 1,59
Centrecity Property Fund 17 266 000 10,56
Martprop Property Fund 29 000 000 4,52
Sycom Property Fund 5 400 000 3,18
2.3 Terms of the acquisition
In terms of the acquisition agreement, Growthpoint will acquire the MPF
portfolio for a total purchase consideration of R650,0 million, to be settled as
to:
2.3.1 R200,0 million in cash ("the cash consideration"), which will be raised
by Growthpoint from a consortium of banks ("the banking consortium") in terms of
debt facilities to be provided to Growthpoint. These debt facilities will be
secured by a cession and pledge of the MPF portfolio; and,
2.3.2 The balance of R450,0 million through the issue to Sentinel and MEPF of
93 750 979 new Growthpoint linked units at a price of 480 cents per new
Growthpoint linked unit ("the vendor units").
2.4 Increase in Growthpoint linked units held by MPF
As a consequence of the vendor units being issued, MPF will increase its
holding in Growthpoint from 58,6% as at 1 October 2002, to 69,9%. It is intended
that the acquisition strategy previously outlined in paragraph 2.1 above will
reduce MPF`s percentage holding in Growthpoint over time.
2.5 Suspensive conditions
The acquisition is subject to, inter alia, the following suspensive
conditions being fulfilled by 31 December 2002 or such later date as may be
agreed between Growthpoint, Sentinel and MEPF:
2.5.1 the granting of all regulatory approvals as may be required from various
regulatory bodies including, inter alia, the JSE and the Securities Regulation
Panel;
2.5.2 the JSE granting approval for the listing of the vendor units on the
JSE; and
2.5.3 the approval of the acquisition by the requisite majority of Growthpoint
linked unit holders in general meeting ("the Growthpoint general meeting").
2.6 Vendors
The vendors of the MPF portfolio are Sentinel and MEPF, both of which are
pension funds registered in terms of the Pension Fund Act, 1956 (Act 24 of
1956).
2.7 Related party transaction
At 1 October 2002, MPF held 58,6% of the Growthpoint linked units in issue
and is therefore a related party to Growthpoint in terms of the Listings
Requirements of the JSE. Accordingly, in terms of the Listings Requirements of
the JSE:
- MEPF and Sentinel will not be taken into account in determining a quorum at
the Growthpoint general meeting and their votes will not be taken into account
in determining the results of the voting at such general meeting; and
- Growthpoint has appointed Ernst & Young Corporate Finance (Proprietary)
Limited as independent adviser to the Growthpoint board to provide a fair and
reasonable opinion on whether the terms of the acquisition are fair and
reasonable.
2.8 Financial effects of the acquisition
The table below sets out the pro forma financial effects of the acquisition,
before any costs relating to the acquisition, on the headline earnings,
distribution and net asset value per Growthpoint linked unit on the basis that:
2.8.1 The figures reflected in the "Published before" column are the results
of Growthpoint for the six months ended 30 June 2002;
2.8.2 The "Pro forma after" column assumes that:
2.8.2.1 the acquisition had been implemented and the MPF portfolio had been
registered and transferred into the name of Growthpoint with effect from 1
January 2002;
2.8.2.2 the distributions which accrued on the MPF portfolio for the six
months ended 30 June 2002 accrued to Growthpoint during that period, save where
any of the companies in the MPF portfolio declared a full year`s distribution in
such six-month period, where the relevant distribution for the six-month period
was brought into account;
2.8.2.3 an average interest rate of 14,25% for six months was paid on the debt
used to finance the cash consideration;
2.8.2.4 in relation to the "Pro forma after" earnings and headline earnings
per Growthpoint linked unit and distribution per Growthpoint linked unit, the
vendor units were in issue for the full six-month period ended 30 June 2002; and
2.8.2.5 in relation to the "Pro forma after" net asset value and tangible net
asset value calculation, the acquisition had been implemented on 30 June 2002
and the vendor units were in issue on 30 June 2002.
Per Published Pro forma Increase/
Growthpoint before after (decrease)
linked unit (cents) (cents) (%)
Headline earnings
for the 6 months
ended 30 June 2002 31,22 32,47 4,01
Distribution for the
6 months ended
30 June 2002 30,41 31,88 4,85
Net asset value and
tangible net asset
value at 30 June 2002 456,92 463,29 1,39
3. CAUTIONARY ANNOUNCEMENT
Growthpoint linked unit holders are referred to the cautionary announcement
mentioned in paragraph 1 above and are advised that other negotiations are still
in progress which may have a material effect on the price at which Growthpoint
linked units trade on the JSE. Accordingly, Growthpoint linked unit holders are
advised to continue to exercise caution in dealing in their Growthpoint linked
units until a further announcement is made.
4. PUBLICATION OF CIRCULAR
A full circular in terms of the JSE Listings Requirements, which circular
will include Revised Listing Particulars and a notice convening the Growthpoint
general meeting, is in the process of being prepared and will be posted to
Growthpoint linked unit holders in due course.
Sandton
18 October 2002
Merchant bank
Investec Corporate Finance
Investec Bank Limited
(Registration number 1969/004763/06)
Legal adviser to Sentinel and MEPF
Bell Dewar & Hall Inc.
(Registration number 1195/04675/21)
Legal adviser to Growthpoint
Fluxmans Attorneys
Website: www.fluxmans.com
(Registration number 2000/024775/21)
Sponsor
Investec Securities Limited
Member of the JSE
(Registration number 1972/008905/06)
Date: 17/10/2002 05:21:00 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
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